Why is BRICS exploring cross-border payments? |Explained
BRICS grouping is examining ways to make cross-border payments among member states faster, cheaper, and less dependent on the dollar-centric correspondent banking network and SWIFT messaging system.
Under discussion are options such as linking domestic fast-payment systems (India's UPI, Brazil's Pix, Russia's SPFS, China's CIPS) and exploring interoperability between central bank digital currencies (CBDCs) of member states.
The BRICS Payment Task Force has been examining greater interoperability between member payment systems, building on a mandate given by BRICS leaders to finance ministers and central bank governors to continue work on a Cross-Border Payments Initiative.
The stated aim is to settle trade directly in national currencies, bypassing correspondent banks and reducing reliance on the US dollar for intra-BRICS trade, while cutting transaction costs and settlement times.
India has flagged its UPI-based instant payment linkages (already interoperable with UAE's payment platform) as a working model that other BRICS members could replicate bilaterally.
Correspondent Banking and SWIFT
A cross-border payment today typically moves through a chain of correspondent banks — banks that hold accounts for each other across jurisdictions — because the sending and receiving banks rarely have a direct relationship. SWIFT (Society for Worldwide Interbank Financial Telecommunication) is not a payment system itself; it is a secure messaging network that transmits payment instructions between banks, while the actual movement of funds happens through correspondent banking relationships or real-time gross settlement systems.
Key Details
- SWIFT was founded in 1973 (headquartered in Belgium) and today connects over 11,000 financial institutions across 200+ countries.
- Each intermediary correspondent bank in a payment chain adds a fee and a time lag, which is why multi-hop cross-border payments can take 1-5 days and cost significantly more than domestic transfers.
- SWIFT facilitates messaging/communication only — it does not hold funds or settle transactions.
BRICS' proposed alternative aims to shorten or eliminate this correspondent-bank chain by linking domestic payment systems directly, reducing the number of intermediaries (and hence cost and time) for intra-BRICS trade settlement.
BRICS as a Grouping and the New Development Bank
BRICS (Brazil, Russia, India, China, South Africa, joined more recently by additional members) is an intergovernmental grouping of major emerging economies that coordinates on economic and financial issues, including reducing dependence on Western-dominated financial infrastructure. Its main financial institution, the New Development Bank (NDB), was set up to fund infrastructure and sustainable development projects in member and other developing countries.
Key Details
- NDB was established in 2014 at the 6th BRICS Summit in Fortaleza, Brazil, and began operations in 2016; headquartered in Shanghai, China.
- NDB's initial authorised capital is USD 100 billion, with USD 50 billion initially subscribed equally among the five founding members.
- As of recent data, local currencies already account for a majority share of trade settlement between BRICS member states, reflecting the broader de-dollarisation push.
The cross-border payments initiative is a complement to the NDB's lending role — both aim to build financial infrastructure that reduces BRICS members' dependence on Western-controlled payment and lending channels.
China's CIPS and India's UPI as Alternative Payment Rails
Countries have been building sovereign payment rails as alternatives to SWIFT-dependent settlement. China's Cross-Border Interbank Payment System (CIPS) enables direct yuan-denominated settlement, while India's Unified Payments Interface (UPI), though originally a domestic real-time payment system, is being extended internationally through bilateral linkages.
Key Details
- CIPS was launched by the People's Bank of China on 8 October 2015 to enable cross-border yuan clearing and settlement, and to support renminbi internationalisation.
- UPI, launched by NPCI in 2016, has been linked internationally with Singapore's PayNow and the UAE's Instant Payment Platform for real-time cross-border retail transfers.
- Russia's SPFS (System for Transfer of Financial Messages) is Russia's domestic SWIFT-alternative messaging system, developed after 2014 sanctions.
BRICS' proposed cross-border payments architecture would seek to interlink these national systems (CIPS, UPI, Pix, SPFS) so that a transaction between any two member states can settle without routing through SWIFT or dollar-denominated correspondent accounts.
- SWIFT: founded 1973, links 11,000+ institutions across 200+ countries; it only transmits messages, doesn't settle funds.
- NDB: established 2014, operational since 2016, HQ Shanghai; authorised capital USD 100 billion.
- CIPS launched 8 October 2015 by the People's Bank of China.
- Local currencies account for a majority of trade settlement among BRICS states as of recent estimates, up sharply in the last decade.
- India's UPI is already interoperable with UAE's Instant Payment Platform, cited as a template for other BRICS bilateral links.